Oct 19 (Reuters) - Health insurer Elevance Health Inc raised its annual profit forecast on Wednesday after beating quarterly estimates on lower-than-expected medical costs and strong performance of its Medicaid business, sending shares up about 2%.
Last week, larger rival UnitedHealth Group Inc raised its annual profit forecast for the third straight quarter and said the direct impact of COVID-19 was expected to ease next year while the recovery in non-urgent procedures could slow due to inflation and labor shortages.
In the third quarter to Sept. 30, Elevance's benefit-expense ratio - spending on claims against premiums earned - was 87.2%, compared with expectations of 87.78% in a Refinitiv poll of five analysts. The lower the ratio, the better it is for a health insurer as it indicates a tight rein on costs.
However, Chief Financial Officer John Gallina said, "though the third quarter did come in better than expected, the overall cost structure of the health system is still a bit higher than what it would have been had COVID never occurred."
"The momentum we have across our businesses leaves us well positioned for growth in the coming years. (But) A more severe recession could create challenges."
Elevance said memberships for health plans increased 4.9% to 47.3 million from last year, driven largely by a rise in Medicaid enrollment.
The company said it had not seen any impact of uncertain economic environment on its commercial business so far.
"For the moment, the operating environment still remains very favorable for managed care companies," said Stephens Inc analyst Scott Fidel.
Elevance, which was previously known as Anthem, now expects annual adjusted earnings to be higher than $28.95 per share, compared with its prior forecast of more than $28.70 per share.
Excluding items, the company reported earnings of $7.53 per share, above analysts' estimates of $7.15, according to IBES estimates from Refinitiv. (Reporting by Mrinalika Roy and Raghav Mahobe in Bengaluru; Editing by Subhranshu Sahu)
